Q1. Following Brexit, in 2021 and beyond, should Brompton reduce the
price of its core product in the U.K. market? Discuss the possible price elasticity of demand for a Brompton bike, and support your answer using theory, the case study materials, and your own research. Potential graph to be shown and explained while answering to this question: https://people.stfx.ca/tleo/Intro_Lecture_3.pdf Q2. How do you think the weakening of the British pound in 2020 affected Brompton's production costs and revenues? What profit maximizing strategies would you recommend if sterling continues to weaken? Q3. What could the government do to mitigate the impact to the U.K's bicycle industry if they did decide to remove the E.U. tariff on Chinese bicycles? What are the pros and cons of such actions? Justify your answer using theory, the case study materials, and your own research. Potential graph to be shown and explained while answering to this question: https://www.economicshelp.org/blog/24571/trade/impact-of-us-tariffs/Case Information 3. Brompton Company Information • Brompton experienced strong growth during and following the late 2000s "credit crunch" and recession: average annual growth in the period since 2008 has been a remarkable 20 per cent. • The company sold around 45,000 folding bikes in 2015, generating revenues of some £21 million and a profit of £3.4 million. • In 2021, the aim is to produce and sell 100,000 bikes—representing more than a doubling of output in just over five years. • In spite of these remarkable figures, the company is still relatively small, employing just 500 members of staff. 4.Overall Bicycle Market Information • The bicycle market is a mature one with a global presence, hence bicycles are popular everywhere and among a wide demographic. • The global market for bicycles was estimated to be worth US$29.2 billion in the year 2020 and is projected to grow by 2.4% CAGR to 2027. • Growth projections differ depending on geographic region, with China forecast to grow by 4.7% CAGR to 2027, and lower forecasts expected in Germany (1.1% CAGR), Japan (0.5% CAGR) and Canada (1.8% CAGR) (Global Industry Analysts XXXXXXXXXX • Hybrid bicycles are expected to grow by 3.1% CAGR over the same period, and around 130 million electric bicycles are expected to be sold between 2020 and 2023. • Even taking into account the economic impact of the COVID-19 crisis, sales of road bikes are expected to grow by 1.7% annually. • In spite of the pandemic, demand for folding bicycles is increasing due to the growth in the number of people that are opting to use cycling for commuting, including those that use public transportation for part of the journey, looking to solve the Last Mile Problem. 5.Current Market Information • On January 1st 2021, the United Kingdom officially left membership of the 27-nation bloc of the European Union ("Brexit"). In June 2016, when the U.K. first voted to leave the European Union, the pound plunged against the euro and the dollar, and it has been volatile ever since (please look at here https://www.statista.com/statistics/412806/euro-to-gbp-average-annual-exchange-rate/ or on Google you can easily find the value of pound against euro over time). Bleak prospects for the country's economic future have been compounded by the COVID-19 pandemic as well as uncertainty surrounding Brexit. • Nevertheless, Brompton has weathered many previous recessions, and is planning to hire 200 additional members of staff in the coming months, and to push sales in bicycle-loving Germany (Lawless 2020). • Nevertheless, Butler-Adams expressed concern that one of the U.K. governments first post-Brexit policies will involve the abolishment of an E.U. anti-dumping tariff of 48.5% imposed on Chinese imported bicycles. Brompton believes that removal of the tax will lead to the U.K. market being flooded with cheap bikes subsidized by the Chinese government. "We can't compete. That is not a level playing field," Butler-Adams told ABC • News. For their part, the British government said it had consulted with bike-makers like Brompton, but believe removing the tariff is important to keep prices low for consumers. • "We recognize the challenges that the industry faces, however British consumers will bear the brunt of higher prices if anti-dumping measures were retained or carried across from the E.U.," it said in a statement in December. • Ultimately, in January 2021, the UK's Department for International Trade confirmed that it would keep EU anti-dumping regulation on bicycles from China and elsewhere, but that at some point in the future, the measures would be reviewed, and potentially dropped.